Chennai: The state government on Friday announced a new scheme under which it will procure cement from private manufacturers and sell them at Rs 190 per bag to offset the impact of skyrocketing retail cement price in the state. “Amma Cement scheme”, named after chief minister J. Jayalalithaa (Amma, as she is fondly addressed by her supporters) offers to sell up to 750 bags at the rate of 50bags per 100 sqft to individuals building houses. Also, 10 to 100 bags will be sold to those renovating houses, Jayalalithaa announced following her recent discussion with the state officials about cement production in Tamil Nadu and ‘import’ from neighbouring states.
About 2 lakh metric tons will be procured from private manufacturers for the scheme. According to an official estimate, TN requires 17 to 18 lakh metric tons per month and a fourth of it (4 - 4.5lakh metric ton) is sourced from united Andhra. Supply from Andhra has reduced to between 1.5 and three lakh metric tons after companies there hiked the price by Rs 80-100 per bag, thereby creating a favourable situation for private manufacturers here to increase the price, CM said in a statement.
No other individual subsidy scheme has enthused associated industries as much as the Amma Cement announcement. Chief Minister Jayalalithaa’s notice to supply cement at a subsidised rate for constructions by low and middle income group individuals seems to have infused a new lease of life among city realtors.
Though the industry does not stand to benefit directly from the plan, the builder community seems to be riding high on the hopes of the positive effect trickling down. “This is an absolutely laudable initiative that can bring big relief to people building their own homes,” said Mr N. Nandakumar, president of the Tamil Nadu chapter of the Confederation of Realtors’ association of India (Credai).
Developers hope that this could set a benchmark price for cement sold in the market that could see the overall price of the commodity coming down. “When government is able to procure from companies and offer at Rs 190 per bag, then it raises questions as to why cement companies cannot sell for lower prices in the market as well,” said Dr Kumar.
With individual constructions accounting for about 30-40 per cent of the total cement consumption, there is widespread hope that this could bring down the overall demand of the commodity.
“Demand is likely to come down heavily and this can have an impact on cement prices too,” hoped Mr R. Sivakumar, chairman of the Builders’ Association of India. “If the people start buying cement individually and give it to contractors to get subsidies, eventually folks who are buying from builders will also start demanding the same,” he said.
“We are very happy that Amma has set this Himalayan task and hope that the next step will be to extend it to the building community,” the BAI official said. However, cement company sources are skeptical about the move, which they say, has been in existence for a long time now.
“Already cement companies have been selling a portion of their produce to governments at subsidy rates for a long time now. This is neither new nor is it exclusive to Tamil Nadu. It is happening in Andhra and other states too,” said a senior industry person. Analysts too feel that the move may not have a direct impact on cement prices in the market meant for the construction community.
“We are seeing prices of crude softening and logistics cost getting rationalised. This may, in turn, may have an impact on cement prices. But we are not sure as to how much the scheme may impact overall cement prices,” said Kanchana Krishnan, Chennai director of the realty consultant firm, Knight Frank India.
